7 Estate Planning Red Flags to Avoid in Your Financial Plan

“If it’s your job to eat a frog, it’s best to do it first thing in the morning. And if it’s your job to eat two frogs, it’s best to eat the biggest one first.” –Mark Twain

After nine years of working in personal finance, the most common task I’ve seen clients avoid is updating their estate planning documents.

This makes sense – it takes time, money, and confronting the reality of death. But it’s so important.

While we are not attorneys, we have read many estate planning documents for clients over the years. Our goal is to ensure account titling and beneficiaries are updated appropriately and that we fully understand our client’s long-term goals for their assets. Sometimes, the review leads to a recommendation that clients meet with their attorney for potential document updates, and there are common reasons why we make this recommendation.

7 Red Flags of Estate Planning Documents

If you are creating your estate plan for the first time, I hope this helps you avoid these pitfalls. If you have an estate plan and know one of these red flags applies to you, I encourage you to ‘eat the frog’ and make the appropriate updates.

1.     Assets Not Titled Correctly

A well-drafted estate plan only works if assets are properly titled. For example, we’ve seen clients create a trust that serves no purpose at their death because they failed to title brokerage accounts or real estate in the name of the trust. A well-designed plan will not function as intended if assets are not titled appropriately—especially when a trust is involved.

2.     No Updates after Life Events

Major life events—such as marriages, divorces, births, deaths, or moving states—often require updates to estate plans. We frequently see outdated beneficiary designations on retirement accounts and life insurance policies, and also individuals who have passed or are no longer appropriate to include listed in wills and trust documents. Keeping the individuals involved in your plan informed ensures assets are distributed according to your wishes.

3.      Personal Representative and Trustee Choices

In some cases, appointing a corporate trustee instead of a family member provides greater continuity, professionalism, and neutrality—helping to avoid family conflicts and ensuring long-term management of assets. For example, your child may be a great fit to list as your healthcare power of attorney but not as the trustee of a complex trust.

4.     Missing Powers of Attorney and Healthcare Directives

An estate plan should include power of attorney documents for financial and healthcare decisions in case of incapacity. These documents make it possible for your loved ones to ensure your wishes are followed.

5.     A Plan that is Different than what Clients had in Mind

Legal writing can be read like a different language. I have had clients tell me what they want to happen at their death, only to read their documents to find that the plan is very different. Ensure you understand your documents, and don’t hesitate to ask questions until you are confident in your plan.

6.     Lack of Updates After Relevant Changes in State and Federal Laws

Estate planning laws evolve, impacting tax strategies, inheritance rules, and trust regulations. For example, The Secure Act of 2020 changed Required Minimum Distribution rules, necessitating a review of trusts listed as beneficiaries on retirement accounts.

7.     Vague Language

Vague or outdated language in estate documents can lead to confusion, disputes, and even legal battles. An example of this is when there are multiple amendments to one trust document rather than restating the trust for clarity.

Ensuring you have an appropriate estate plan is perhaps the easiest personal finance task to avoid, but it’s essential. If you value accountability in addressing this, email us!

Hannah Whatley, CFP®, AIF® is an Advisor with Rather & Kittrell.